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Preparing your investment property for tax time

Updated: Jun 1, 2022

As we come to the end of the financial year and prepare ourselves for tax time, it's important to be well prepared with our rental properties. This is especially relevant if you're a property investor. At Real Estate Investment Finance, we understand how beneficial it is to make the most out of your investment property and understanding the tax deductible items that you can claim with your accountant.

What can you claim on your investment property?

In a previous article we wrote on the claimable tax deductions you can receive from your investment property, we highlighted the expenses that you can expect back into your pocket at tax time. It's important to note that as a property investor, you can only claim the expenses that you incur on your investment property; NOT the expenses incurred by the tenant (like their rent).

To recap on that previous article, some of the expenses that you may be eligible to retrieve on your rental properties at tax time are;

  1. Advertising costs - if your investment property was vacant and you were advertising it for tenants

  2. Strata fees if your property requires body corporate fees

  3. Insurance fees

  4. Council and water rates

  5. Agents statements

  6. Land tax

  7. Maintenance and repairs

  8. Interest expenses

  9. Investment property depreciation

  10. Land tax

  11. Borrowing fees

  12. Pre-paid expenses

Keeping a record

No one likes to be unprepared!

Leaving things to the last minute can lead to elevated stress and confusion. Therefore, we strongly recommend recording and keeping track of the expenses and income you incur from your investment property.

As a real estate investor, there are a few simple record keeping skills that you an implement to make tax time a whole lot easier for both you and your tax accountant.

Record keeping tips that all real estate investors should be aware of to claim tax

Record keeping tip No.1

Ask your property manager to provide you with regular summaries of the expenses they pay with the rent received from your rental properties. In an article by an investment expert, Michael Yardney, he states, "You'll get a monthly summary and at the end of the tax year they should provide you with a summary of all the rent you've received and all the expenses paid on your behalf."

Over a 12 month period, you'll be able to collate a dozen summary pieces to present to your tax accountant to claim against your rental property.

Record keeping tip No.2

Being sure not to claim the expenses paid out by your real estate agent (on your behalf), you will also want to keep a record of the expenses that you pay . Each time you pay for expenses relating to your investment property, be sure to record it right away in your own spreadsheet. Attach all relevant supporting documents such as paid invoice receipts.

Record keeping tip No. 3

As a property investor, in the lead up to the end of the financial year you may benefit from a property depreciation report. This can be conducted by a property surveyor who will evaluate the fixtures and fittings within and around investment property.

The value of the fixtures and fittings around your property depreciates over a course of time. According to the ATO, you can claim this as a tax write off. Present the findings from this report to your accountant so that it can be added to your tax write off.

Record keeping tip No. 4

Record keeping tip: keeping a track of all the interest paid on the loans of your investment property

As an investor, another useful record keeping tip is documenting all the interest paid on loans relating to your rental properties. This can be put into a spreadsheet. To make it easier for your accountant you may benefit from providing a summary in relation to the total of this value.

Hire a good tax accountant

As property investors, our team at REIF cannot stress the importance of hiring a good tax accountant enough! Your average personal tax accountant often wont cut it especially if your the owner of a diverse property portfolio. Therefore, we strongly suggest hiring a tax accountant that's well versed in property investments.

If you're in need of a good tax accountant please reach out to us as we can recommend a few that will be able to assist you with making the most out of your investment property at tax time.

Always happy to help

If you have any questions about property investment or are looking to begin your investing journey, REIF are always happy to help. From finance to securing that right property and beyond, we'll be sure to set you on the right track to becoming a successful property investor. Please reach out on the details listed below.

Ph: 1300 130 932

We explore this topic in our eBook 'Building Wealth Through Property.' Check it out here for FREE!
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